D101 Cost and Managerial Accounting - Set 5 - Part 3

Correct Answer: Debit work-in-process inventory, credit manufacturing overhead

When overhead is applied to a job, work-in-process inventory is debited to reflect the cost added to the job, and manufacturing overhead is credited to decrease overhead.

Correct Answer: Direct labor

Direct labor is a cost that can be directly traced to individual jobs, unlike indirect costs, which are allocated to jobs using an overhead rate.

Correct Answer: To average costs of all units produced, both completed and partially completed

The weighted average method in process costing averages the costs of units completed and units still in process to determine the cost per equivalent unit.

Correct Answer: Job order costing assigns costs to individual jobs, while process costing averages costs over all units produced.

Job order costing is used for custom jobs where costs are assigned to specific jobs, while process costing is used for large-scale production where costs are averaged across units.

Correct Answer: Overhead is underapplied

When actual overhead costs exceed applied overhead, it results in underapplied overhead, meaning not enough overhead has been allocated to jobs.

Correct Answer: The point at which total revenue equals total costs

The break-even point is the level of sales at which total revenue equals total costs, resulting in no profit or loss.

Correct Answer: To allocate overhead costs to individual jobs

The predetermined overhead rate is used in job order costing to apply overhead costs to jobs based on a chosen allocation base, such as labor hours or machine hours.

Correct Answer: Sales revenue minus variable costs

The contribution margin is the difference between sales revenue and variable costs, representing the amount available to cover fixed costs and generate profit.

Correct Answer: Identify the percentage of completion for units in ending work-in-process inventory

In process costing, the first step in calculating equivalent units of production is to assess the percentage of completion for partially finished units in ending inventory.

Correct Answer: Allocated using a predetermined overhead rate

Indirect costs, such as overhead, are allocated to individual jobs using a predetermined overhead rate, which is based on an allocation base like labor hours or machine hours.